7 ms·

Art is crime [NFT artist funds seized]

61 points by fred256 4y ago

witheld 4y ago
I don’t believe him. It sounds to me like he played the usual scheme, having people pay for his NFTs to inflate their value- while sending the funds back.
- davidguetta 4y ago
  Why would you assume this ?
  - elil17 4y ago
    Even though he says he’s obtained documents stating what he was accused of, he doesn’t say what that is.
- scotty79 4y ago
  It's not money laundering and I don't think it breaks any laws.
  - fragmede 4y ago
    That's called Wash trading, and there are Wash-Sale rules in effect.
    - scotty79 4y ago
      Doesn't it regulate only securities trades?
- uoaei 4y ago
  > the usual scheme That's the thing about scams. You don't have to listen to a word of anybody's rationalizations about these kinds of things. You just look at the money flows. If it banks like a scam, it's a scam, end of story.
- doopy1 4y ago
  How did he pay millions in taxes with money he sent back?
- iskander 4y ago
  ...how did he end up with 8.7M EUR if he sent this money back?
- bdr 4y ago
  This isn't true, and also makes no sense. (How would he have paid taxes? What money would the police have seized?) Speaking from first-hand experience, there's a significant community of collectors who like and will buy Shvembldr's work.
  - witheld 4y ago
    The money from the purchases after the value is inflated.
malfist 4y ago
Well that's a sensationalist title and hyperbole filled article. Art is not illegal. Money laundering is.
ImPostingOnHN 4y ago
I get that this blog is one sided because it's literally from one of the sides, but not providing any details of the allegations seems sketchy, and makes me wonder what other important details he is omitting. Are we to assume that because this guy has a blog, he must not be guilty?
- doopy1 4y ago
  My understanding is that there are no clear allegations, that's the problem.
  - deleted 4y ago
    [deleted]
yellow_lead 4y ago
Whether or not you suspect he is guilty, according to the timeline, the police seized his property without justification delivered to him or his lawyer, which appears to be required by law. If you are ok with that for a suspected guilty person, I hope you aren't ever wrongly accused.
gizmo 4y ago
I haven't read the entirety of the page, but I think I got the main points. The artist claims he's in the clear because he paid taxes on his income he made by selling NFT artpieces created by him. However, he gives no indication (as far as I can tell) that he has any kind of information on his customers. Does he have invoices? Did he collect name, address, and phone number for each customer? Did he make a reasonable effort to see if his customers were not obvious crooks? He published transactions from various crypto chains, but that doesn't prove anything except that crypto transactions have taken place. The author rants extensively about how corrupt and illegal the government's actions are, but he provides no evidence that he conducted his business in a serious and professional way. He feels like his actions should be legal, but it's not obvious that he hasn't inadvertently facilitated money laundering. After all, if he's a popular NFT artists then people with illicitly gained crypto could easily have been trading his NFT art to launder their money. I think it's pretty likely that much of last year's NFT bubble was the result of scammers/fraudsters/ponzi operators looking to obscure the source of their new wealth, and this guy happened to be a big beneficiary of it.
- etrautmann 4y ago
  I'm not sure your argument makes sense - Does conducting your business in a serious way as an artist involve finance-levels of know-your-customer regulatory compliance? Most business, aside from finance, do not know much about who's buying whatever product they're selling. Individual artists shouldn't be on the hook to do background checks on art buyers. <edits for clarity>
  - gizmo 4y ago
    As a business you have to issue invoices and you also have a responsibility to stop obviously criminal behavior. A car dealership can’t sell somebody a Lamborghini if they want to pay with crumpled $20 notes. An art dealer can’t buy a Mondrian that the seller claims they found in their granny’s attic. I don’t understand how this is controversial.
    - etrautmann 4y ago
pjc50 4y ago
Reminds me of all the US cops just seizing cash and forcing a lawsuit for it to be returned. However, it's an inherent risk with crypto if the law requires all your income to be explicable. i.e. >> The decision to arrest stated that I was receiving money from Coinbase, and therefore it is impossible to trace the source of funds It's not clear if he knew who his counterparties were? (natural persons, not accounts) I see the comment thread is going to be people just assuming guilt or innocence based on a cursory reading of this, which is going to be a mess.
- pjbeam 4y ago
  Is the implication then that if I sell lemonade out on the street and you give me cash for one that my funds should be seized because I don't know the provenance of the cash?
  - closewith 4y ago
    If the transaction value at your lemonade stand exceeds €10,000, then in the EU, you are required to verify the identity of the beneficial owner of the funds, thanks to AML5.
elil17 4y ago
In countries where free expression is actually a crime, people don’t just get their money seized, they get arrested. There’s probably a due process issue here but that doesn’t mean “art is a crime.” If anyone speaks Latvian I would love to know what those legal documents he posted say the crime he committed was.
- jsmith45 4y ago
  From a quick machine translation, the documents basically say that NFTs (as crypto) are high risk transactions often associated with criminal enterprises, and untraceable money flows. They think instead of being legit art sales, the NFT sales where part of a complex scheme through which he was laundering money. (Likely this scheme amounts to selling the art to himself. It is not especially difficult to have your various criminal wallets buy NFTs from yourself, making it look like legit purchases. Alternatively he and a ring of criminal associates could be buying nfts from each other with their dirty funds.) The documents provide basically no indication of them having any evidence of this beyond "large amounts of money" moved via crypto. The documents even make it sound like that is their only evidence. But the documents claim that because they have reasonable suspicion that the money came from crimes, they can seize it. The documents make it sound like money laundering is technically only illegal if the original source of the money is illegal, but make no effort to establish that the pre-laundered funds are criminal, and point out that the law does not require them to identify the crime from which the funds were originally obtained. The assertion in the arrest documents seems to be basically that making a lot of money by selling NFTs is in itself sufficient cause to believe that money laundering of illegal funds was occurring, which provides sufficient justification for seizing the funds.
nftchad420 4y ago
iskander 4y ago
Whatever your opinions on generative art sold as NFTs, the lack of regulatory clarity seems pretty stifling. The author asked for guidance: >I called the VID (Latvian State Revenue Service) and asked in detail what I should do. I was told that I should first register as a self-employed person with the profession of an artist. And I have to convert my income into fiat and pay tax on the income in fiat because cryptocurrency is not money in Latvia. ...followed it by converting to Euros and paying taxes and then still had his bank account frozen for half a year without any further clarification on what he did wrong or how to fix it.
- closewith 4y ago
  It seems that the criminal complaint is related to money laundering (ie concealing the true source and/or beneficial owner of the funds) rather than tax evasion. If that is the case, then tax compliance is expected (as the point of money laundering is to produce a clean post-tax cash flow). I have no opinion as to the legitimacy of the criminal accusations, but having correctly paid tax liabilities would not be a defence.
  - iskander 4y ago
    Right, it seems that they want a KYC list for everyone who bought his art, which isn't possible given the medium. Some announcement of that policy would be better than letting it become known through surprise enforcement.
    - closewith 4y ago
      > Right, it seems that they want a KYC list for everyone who bought his art, which isn't possible given the medium. If that's true, then the medium does not appear to be a lawful method for transactions above €10,000 in the EU. > Some announcement of that policy would be better than letting it become known through surprise enforcement. AML 5 - the Directive which introduced this regulation - is not exactly a secret. Especially if transacting through a company, it is very difficult to argue ignorance as a defence to non-compliance. Traditionally, dealers and auction houses would require and assist with KYC/AML compliance, which was part of the value they offered. Relying on non-compliant permissionless contracts does not absolve the vendor of their responsibilities.
rocketeeter 4y ago
Devastating to see a government come after an artist with no justification. Shvembldr has been such a positive force for good in the generative art space. Stay strong
rez8 4y ago
"I do not like NFTs, therefor this guy is a scammer, and deserves to have his assets seized" - HackerNews community Disappointing.

61 points by fred256 4y ago

I don’t believe him. It sounds to me like he played the usual scheme, having people pay for his NFTs to inflate their value- while sending the funds back.

davidguetta 4y ago
Why would you assume this ?
- elil17 4y ago
  Even though he says he’s obtained documents stating what he was accused of, he doesn’t say what that is.
scotty79 4y ago
It's not money laundering and I don't think it breaks any laws.
- fragmede 4y ago
  That's called Wash trading, and there are Wash-Sale rules in effect.
  - scotty79 4y ago
    Doesn't it regulate only securities trades?
uoaei 4y ago
> the usual scheme That's the thing about scams. You don't have to listen to a word of anybody's rationalizations about these kinds of things. You just look at the money flows. If it banks like a scam, it's a scam, end of story.
doopy1 4y ago
How did he pay millions in taxes with money he sent back?
iskander 4y ago
...how did he end up with 8.7M EUR if he sent this money back?
bdr 4y ago
This isn't true, and also makes no sense. (How would he have paid taxes? What money would the police have seized?) Speaking from first-hand experience, there's a significant community of collectors who like and will buy Shvembldr's work.
- witheld 4y ago
  The money from the purchases after the value is inflated.

malfist 4y ago

Well that's a sensationalist title and hyperbole filled article. Art is not illegal. Money laundering is.

ImPostingOnHN 4y ago

I get that this blog is one sided because it's literally from one of the sides, but not providing any details of the allegations seems sketchy, and makes me wonder what other important details he is omitting. Are we to assume that because this guy has a blog, he must not be guilty?

doopy1 4y ago
My understanding is that there are no clear allegations, that's the problem.
- deleted 4y ago
  [deleted]

yellow_lead 4y ago

Whether or not you suspect he is guilty, according to the timeline, the police seized his property without justification delivered to him or his lawyer, which appears to be required by law. If you are ok with that for a suspected guilty person, I hope you aren't ever wrongly accused.

gizmo 4y ago

I haven't read the entirety of the page, but I think I got the main points. The artist claims he's in the clear because he paid taxes on his income he made by selling NFT artpieces created by him. However, he gives no indication (as far as I can tell) that he has any kind of information on his customers. Does he have invoices? Did he collect name, address, and phone number for each customer? Did he make a reasonable effort to see if his customers were not obvious crooks? He published transactions from various crypto chains, but that doesn't prove anything except that crypto transactions have taken place. The author rants extensively about how corrupt and illegal the government's actions are, but he provides no evidence that he conducted his business in a serious and professional way. He feels like his actions should be legal, but it's not obvious that he hasn't inadvertently facilitated money laundering. After all, if he's a popular NFT artists then people with illicitly gained crypto could easily have been trading his NFT art to launder their money. I think it's pretty likely that much of last year's NFT bubble was the result of scammers/fraudsters/ponzi operators looking to obscure the source of their new wealth, and this guy happened to be a big beneficiary of it.

etrautmann 4y ago
I'm not sure your argument makes sense - Does conducting your business in a serious way as an artist involve finance-levels of know-your-customer regulatory compliance? Most business, aside from finance, do not know much about who's buying whatever product they're selling. Individual artists shouldn't be on the hook to do background checks on art buyers. <edits for clarity>
- gizmo 4y ago
  As a business you have to issue invoices and you also have a responsibility to stop obviously criminal behavior. A car dealership can’t sell somebody a Lamborghini if they want to pay with crumpled $20 notes. An art dealer can’t buy a Mondrian that the seller claims they found in their granny’s attic. I don’t understand how this is controversial.
  - etrautmann 4y ago

pjc50 4y ago

Reminds me of all the US cops just seizing cash and forcing a lawsuit for it to be returned. However, it's an inherent risk with crypto if the law requires all your income to be explicable. i.e. >> The decision to arrest stated that I was receiving money from Coinbase, and therefore it is impossible to trace the source of funds It's not clear if he knew who his counterparties were? (natural persons, not accounts) I see the comment thread is going to be people just assuming guilt or innocence based on a cursory reading of this, which is going to be a mess.

pjbeam 4y ago
Is the implication then that if I sell lemonade out on the street and you give me cash for one that my funds should be seized because I don't know the provenance of the cash?
- closewith 4y ago
  If the transaction value at your lemonade stand exceeds €10,000, then in the EU, you are required to verify the identity of the beneficial owner of the funds, thanks to AML5.

elil17 4y ago

In countries where free expression is actually a crime, people don’t just get their money seized, they get arrested. There’s probably a due process issue here but that doesn’t mean “art is a crime.” If anyone speaks Latvian I would love to know what those legal documents he posted say the crime he committed was.

jsmith45 4y ago
From a quick machine translation, the documents basically say that NFTs (as crypto) are high risk transactions often associated with criminal enterprises, and untraceable money flows. They think instead of being legit art sales, the NFT sales where part of a complex scheme through which he was laundering money. (Likely this scheme amounts to selling the art to himself. It is not especially difficult to have your various criminal wallets buy NFTs from yourself, making it look like legit purchases. Alternatively he and a ring of criminal associates could be buying nfts from each other with their dirty funds.) The documents provide basically no indication of them having any evidence of this beyond "large amounts of money" moved via crypto. The documents even make it sound like that is their only evidence. But the documents claim that because they have reasonable suspicion that the money came from crimes, they can seize it. The documents make it sound like money laundering is technically only illegal if the original source of the money is illegal, but make no effort to establish that the pre-laundered funds are criminal, and point out that the law does not require them to identify the crime from which the funds were originally obtained. The assertion in the arrest documents seems to be basically that making a lot of money by selling NFTs is in itself sufficient cause to believe that money laundering of illegal funds was occurring, which provides sufficient justification for seizing the funds.

nftchad420 4y ago

iskander 4y ago

Whatever your opinions on generative art sold as NFTs, the lack of regulatory clarity seems pretty stifling. The author asked for guidance: >I called the VID (Latvian State Revenue Service) and asked in detail what I should do. I was told that I should first register as a self-employed person with the profession of an artist. And I have to convert my income into fiat and pay tax on the income in fiat because cryptocurrency is not money in Latvia. ...followed it by converting to Euros and paying taxes and then still had his bank account frozen for half a year without any further clarification on what he did wrong or how to fix it.

closewith 4y ago
It seems that the criminal complaint is related to money laundering (ie concealing the true source and/or beneficial owner of the funds) rather than tax evasion. If that is the case, then tax compliance is expected (as the point of money laundering is to produce a clean post-tax cash flow). I have no opinion as to the legitimacy of the criminal accusations, but having correctly paid tax liabilities would not be a defence.
- iskander 4y ago
  Right, it seems that they want a KYC list for everyone who bought his art, which isn't possible given the medium. Some announcement of that policy would be better than letting it become known through surprise enforcement.
  - closewith 4y ago
    > Right, it seems that they want a KYC list for everyone who bought his art, which isn't possible given the medium. If that's true, then the medium does not appear to be a lawful method for transactions above €10,000 in the EU. > Some announcement of that policy would be better than letting it become known through surprise enforcement. AML 5 - the Directive which introduced this regulation - is not exactly a secret. Especially if transacting through a company, it is very difficult to argue ignorance as a defence to non-compliance. Traditionally, dealers and auction houses would require and assist with KYC/AML compliance, which was part of the value they offered. Relying on non-compliant permissionless contracts does not absolve the vendor of their responsibilities.

rocketeeter 4y ago

Devastating to see a government come after an artist with no justification. Shvembldr has been such a positive force for good in the generative art space. Stay strong

rez8 4y ago

"I do not like NFTs, therefor this guy is a scammer, and deserves to have his assets seized" - HackerNews community Disappointing.